Analysis of International Trade of Ivory Coast: assessment of Intra industry.
More and more, intra-industry trade is an important component of international trade
especially in developed countries with strong commercial potential where it is embedded and
which it contributes significantly to wealth creation.
Moreover, among the least developed countries, some such as Ivory Coast has huge
advantages in terms of trade, which contributed significantly to the achievement of a
prosperous economy. If intra-industry growth contributes to the improvement of the gains of
the advanced countries, this study aims to analyze the content of international trade of the
country by assessing the intra-industry trade and quantifying the impact of this kind of trade
on economic growth by an econometric approach.
Three hypotheses have been advanced. First, the level of trade is linked to that of intraindustry trade. Secondly, intra-industry trade is practiced between structurally neighboring
countries and in third position, intra-industry is low in non-specialized in manufactured
products countries.
The results show that international trade in Ivory Coast is positively influenced by his level of
intra-industry trade and contribute to economic growth. In addition, this kind of trade is
directed towards partners that are structurally different to the country like Europeans
countries.
It would therefore be interesting for policy makers to operationalize Ivorian issues of
industrialization and production diversification to better absorb shocks from international
markets and also improve its comparative advantages.
Key words: intra-industry trade, simultaneous equations, Grübel and Lloyd index, Aquino
index.
1. Introduction
Context
World trade has continued to grow significantly over time. Indeed, the commercial
transactions of the globe are grown from U.S. $ 292 billion in 1970 to U.S. $ 4252 billion in
1993, an increase of 1356% in 20 years. The index of the value of exports (2000 = 100) rose
from 100.4 in 2002 to reach 249.5 in 2008, while the index of the value of imports grew by
146% over the same period. Moreover, if the trade volumes reach proportions never seen
before, this will not happen without change in contemporary business practices. Thus, over
70% of current business transactions consist of exchanges between similar products, ie
products of the same branch.
In addition, the African continent as a whole has struggled to keep up this new dynamic
unlike other economic centers. In 2007, for example, the share of exports of African goods in
world exports totaled around 3.1% and 2.5% for imports, while in Europe represented the
same year 42.51% of world exports and 43.43% of world imports.
Ivory Coast, one of the heavyweights of the African trade, the world's leading exporter of
cocoa, is not in rest of these mutations. Because, of the trade, the country has experienced an
average growth rate of 6.8% between 1965 and 1980, which was described as the "Ivorian
miracle". This has enabled the country to seriously consider the development. However, the
underperformance recorded during the years following challenge on the possible causes of
this situation. The country's external debt grew significantly constrains development
mechanisms.
Problem
Besides the fact that the global economy has not been in recent years in favor of countries,
because of falling commodity prices, rising dollar and strong competition internationally for
its main export product, policy trade of Ivory Coast does show that she not fit easily with the
new forms of exchange in the world, mainly in intra-industry trade. In other words, what
could be the impact of this type of trade on the country economic growth?
Study objectives
General objective
The aim of our study is to analyze the ivorian trade and assess its intra-industry trade practice
through its impact on the economy.
Specific Objectives
We assume this general purpose into two specific objectives :
- The analysis of the cross-flow of products in the branches (importance / assessment /
estimate)
- The study of the relationship between trade and intra-industry trade (based on an
econometric approach).
Hypothesis
As part of the econometric analysis, we assumed three hypothesis:
H1: Foreign trade increases with the level of intra-industry trade.
H2: The level of intra-industry trade depends on the characteristic of the commercial partner0
H3: intra-industry trade remains low in not specialized manufactured savings products.
2. Literature Review
Intra-industry trade: a theoretical review
The traditional analysis of international trade that developed by Ricardo and HOS ( Heckser ,
Ohlin , Samuelson ) show that, most countries have different factor endowments , plus their
specializations will be complementary and therefore cross- trade products will be observed ,
what could be called a north-south trade. However, the situation after 1960 reveals that there
were strong currents of cross trade in similar products between countries with fairly similar
factor endowments , mainly from northern countries . Thus, authors such as Linder shows
through his “theory of representative demand” that the share of intra branches is higher
between countries that have very strong similarities of factor endowments . Indeed , for the
author a good may be exported only if it is first subjected to strong domestic demand and the
property is exported to a country with likely levels living relatives. In addition, “demand
theory difference” of Lassudrie - Duchène states that even if the intra-industry trade is
growing between countries with most similar endowments , it remains that the products are
not exactly the same . These have potential for differentiation resulting from their brand , their
specific qualities , etc. that will create the conditions intra-industry trade . This logic of
differentiation can be expressed only in countries with a high standard of living , which
explains that the intra-industry trade takes place mainly among Developing Countries . After
that, Posner introduces technological progress in the analysis of the phenomenon. For him, it
characterizes the comparative advantages of a country. Thus , developed countries are
exporting products with intensive technology - , while developing countries mainly export
only commoditized products. These studies will be supported by other authors such as
Krugman and Vernon with his theory of the life cycle of a product.
Intra-industry trade: an empirical review
Two studies were mainly operate in support of this part of the study . The first , led by Phan
Duc Gaussens and clear Claude sheds light on a number of aspects of intra-industry trade
including the identification of the determinants of the relationship between them and
international capital movements, identified in the form of foreign direct investment (FDI).
This study on the analysis of intra-industry trade is made on a wide range of products ,
defined at the finest in the classification of the five-digit of International Trade Classification
Type (ITCT) revision , and for which a calculation on more aggregated data ( nomenclature
three-digit SITC revised ) reveals an important cross trade . The results can be given in three
points mainly :
First, the existence of an international intra -industry trade is focused on differentiated
products , characterized by a concentration of large and balanced bilateral trade , which tends
to exclude the recovery of a possible hierarchy between trading partners in the orientation of
the flow of goods.
Secondly it appears clearly that low dispersion consumption patterns reinforced by economic
proximity has a positive influence on the development of intra -industry trade and
Third, the complementary nature of direct investment crossed towards international trade in
differentiated products does exist . However the impact of factor endowments , although it
seems to exercise the right way , could not be precisely identified .
The second study was conducted by Hatem et al and aims to study the impact of intra-industry
trade on the adjustment of employment to verify the hypothesis of low employment
adjustment cost ( Smooth Adjustment Hypothesis , SAH).
Using the measure of Brulhart , the MIIT , at the expense of Grübel and Lloyd, and using a
panel model with fixed effects for the Tunisian case the period between 1983 and 2000 , they
show two important results.The first implies that the best indicator to study the relationship
between intra-industry trade and adjustment of employment is an index of Brulhart noted A
and the second is that the hypothesis of poor fit is checked. In fact, a 1% increase in the
marginal intra -industry trade ( CIBm ) leads to a 0.04% decrease in the unemployment rate .
3. Analysis of export and import flows of Ivory Coast
Exports: the first 5 products exported
Ivorian exports an uptrend in our study period. They rose nearly 6 bn1 dollars to around 10
dollars bn in 2009.
Analysis of the products exported by the Ivory Coast in recent years at the 2-digit is contained
in the following table:
1
billions
Table 1: The top 10 products (code with 2 digits) of Ivory Coast (in percentage of its total
exports).
Code
18
27
87
product
Cocoa and cocoa
preparations
Mineral fuels, mineral
oils, products of their
distillation
Vehicles, tractors, cycles
and other vehicles,etc.
2004
2005
2006
2007
2008
2009
33,17
28,43
24,98
27,33
28,71
36,23
18,52
27,73
36,87
32,59
37,1
29,37
12,15
2,83
3,95
4,61
5,14
3,37
89
Wood, charcoal and wood
products
5,25
4,59
2,27
0,05
0,99
3,3
8
Edible fruit and nuts, peel
of citrus fruit or melons
3,65
3,52
3,59
3,56
3,46
3,13
Source : International Trade Center, our calculations
Then, we see that the group of products' s cocoa and its preparation "is an important part of
exports followed the" mineral fuels, etc..
Exports: the first 5 partners importers of the products exported by the country in
Africa
Table 2: the 5 major African importers of Ivorian products (% of total exports of Ivory Coast)
Importers
2004
2005
2006
2007
2008
2009
Nigéria
27,54
26,76
24,53
24,96
19,95
23,32
Burkina Faso
10,65
10,69
12,39
13,18
13,14
12,43
Ghana
Mali
Sénégal
8,97
8,04
5,62
6,85
7,33
6,09
6,63
9,36
3,99
6,29
11,52
4,92
14,38
10,4
5,23
18,38
8,7
4,77
Source : International Trade Center, our calculations
In the top 5 in Africa, Nigeria stands essentially, followed by Burkina Faso. Products exported
to these remain "oilseeds" and others.
Regarding the European partners, France ranks first with nearly 40% of Ivorian exports.
Imports: the first 5 products imported by Ivory Coast
Like exports, imports grew by 2004 to 2008 from 4 bn U.S. dollars to nearly 8 bn before
falling around 7 bn in 2009. In addition, the main products imported by the country are given
in the following table:
Table 3: The 5 main imports in % of total imports of Ivory Coast
Code
Libellé produit
2004
2005
2006
2007
2008
2009
27
Mineral fuels, mineral oils,
products of their distillation
23,2
28,03
31,78
30,17
35,71
25
87
Vehicles, tractors, cycles and
other vehicles, etc
18,24
14,42
11,59
10,89
5,22
5,52
10
Cereals
5,94
5,38
6,16
6,25
7,33
10,57
84
Machinery, nuclear reactors,
boilers, machinery
6,1
4,79
5,14
6,73
6,6
8,8
4,31
5,1
5,53
4,64
6,45
Machinery and electrical
4,17
equipment, their parts, etc.
Source : International Trade Center, our calculations
85
It can be noted that the product groups with code 27 and 87 are both concerned by imports
and exports. These imported products come to mainly partners like Nigeria, France, the
United States, China. Many of those are involved in import and export flows.
There are many reasons to believe that there exists a type of intra-industry trade between
Ivory Coast and its partners.
In the next section, we try to calculate the index of intra-industry trade of Grubel and Lloyd
for the country.
4. Intra-industry trade index computing
International trade is composed of two components, one intra-industry exchange and the
other, the inter-industry trade.. If Xi represents exports and Mi imports, then we have:
with
and Ri the intra-industry trade.
Based on this distinction, Grübel and Lloyd (1975) propose two measures to assess each
country's proportion of total trade, all sectors combined, attributed to the intra-industry trade.
The first recorded, calculated for each country the coefficient of intra-industry trade without
considering
the
correction
of
imbalance
in
the
trade:
with
and
respectively exports and imports of country
j for products branche i (i = 1, ..., n branches).
is taken the value between 0 and 1 (taking the remarkable value of 2/3 if exports (resp.
imports) covers exactly half of imports (resp. exports))
if the country is exclusively importer (or exporter only) for all goods;
if the trade balance is achieved for each product.
However this index underestimate the importance of intra-industry trade for countries whose
trade is not balanced. Hence the was a production of another index recorded adjusted trade
imbalance :
Moreover,
tends to overestimate the importance of intra-industry trade because when the
trade balance is in equilibrium, the denominator tends to decrease and consequently
introduces a bias towards higher coefficient. So, the two countries with the same
have
may
different if one of them is in surplus (or very deficient) in many branches. Then,
Aquino (1978) propose an index
which measures the difference in the composition of
imports and exports observed for a country:
Fj  1 
1 n X ij M ij
 
2 i 1 X . j M . j
The
index of Aquino takes an intermediate value between
and
of Grübel and
Llyod. The calculations of these three indicators give us the following results:
Table 4: The indexs of Grubel-Lloyd and Aquino from 2004 to 2009
2004
2005
2006
2007
2008
B
0,49
0,53
0,47
0,47
0,44
F
0,45
0,53
0,5
0,49
0,48
C
0,58
0,59
0,56
0,52
0,5
2009
0,36
0,4
0,45
Source : International Trade Center, our calculations
The results of Aquino (1978) are confirmed. F value is an intermediate value between B
(unadjusted index) of Grübel and Lloyd, who has a bias towards lower and C (corrected the
imbalance in the trade balance) which tends instead to skew the intra-industry trade to
increase.
In addition, the coefficients are below 2/3, the Ivorian intra-industry trade is low and poorly
developed. In addition, a comparative analysis with other countries allow us to corroborate the
previous results. We represent, for the same period of study, the Grübel-Lloyd index of some
countries, for comparison:
Graph 1: Index B of Grubel and Lloyd of some countries.
Source : International Trade Center, our calculations
Two blocks are drawn on the graph. The first batch of three countries that find themselves at
the bottom of the graph and these are developing countries (or less advanced countries) and
other block consists of advanced countries that have indices more than 0.5. This evidence that
intra-industry trade is very little developed to the less developed economies.
Moreover, it should be noted that the higher the level of disaggregation is fine (eg position of
6, 8 digits), the higher the index decreases and tends to 0.
5. Trade and intra-industry trade: link specification.
The model
The structuring of relationships we seek to determine leads us to choose the simultaneous
equations model for our study variables belong to a set of interrelated equations. According to
our assumptions and based on the literature, we use as endogenous variables the opening rate
as representative for Foreign Trade (ICE) and Aquino index F (IA) to represent intra-industry
trade. In what concerns the exogenous variables, we use the variable on the identity of
consumption patterns that we note EIMP where
with mi as the part of
ivorian imports and mi the average of the major trading partners of Ivory Coast including
the top 5 in terms of exports and imports. This variable will check the hypothesis according to
which the intra-industry trade of differentiated goods is intensive between countries with
similar characteristics or endowments. Then we have the identity of variables that factor
endowments EPIB we note that is a mean absolute deviation between the Ivorian GDP and
those of its main partners, the indicator of Foreign direct investment (FDI), the indicator
economic distance we note idist which take the value 1 if the partner is a member of the
Waemu countries and 0 otherwise. This will capture the effect of distance on the Ivorian
foreign trade especially in the intra-industry trade. It’s to see if Ivory Coast make trade with
the member countries of its economic zone (there we choose West African Economic and
Monetary Union WAEMU) instead of advanced countries . And the last variable is GDP. The
model
 IAt   0  1 IDEt   2 IDISTt   3 EPIBt   4 EIMPt  1t
 ICEt  0  1 IAt   2 IDEt  3 PIBt   2t
can be written as: 
Equations 1 and 2 are over identified, which allows us to apply the double least squares. The
estimate under E_views gives the following results:
IAt  0, 029712 IDIST  0, 000114 IDE  6, 71.10 08 EPIB  7, 45.10 11 EIMP
ICEt  0,689670 IAt  7,97.1006 PIBt  0.000151IDEt
Interpretation of results
 The intra-industry trade of goods is positively related to the slack variables of the
economic characteristics of the Ivory Coast and its key partners.
The Ivorian intra-industry trade is directed to advanced countries (eg France, Usa) rather than
those that have similar structures with him. It also confirms that the positive relationship
between intra-industry trade in the distance between the Ivory Coast's main partners in the
intra-industry trade that the differences in gross domestic product to be smaller, they share in
intra-industry term. This can be explained by the fact that neighboring countries of Ivory
Coast are remote from the point of view of the similarity of economic characteristics, is
brought to trade with more developed partners in terms of intra-industry.
 Trade is positively related to the Aquino index intra-industry trade.
The assumption that the Foreign Trade (ICE) is influenced by the level of intra-industry trade
IA is verified. More the inter-industry trade grow, more Ivory Coast has advantages in terms
of products serving Crusaders trade flows. This can be explained by the economic growth of
the country and also of foreign direct investment (FDI).
Conclusion and recommendations
It appears very clearly from the statistical estimation that, contrary to the theory and empirical
analysis, the high dispersion of the structures of imports increased by economic proximity has
a positive influence on the development of intra-industry trade. Regarding the influence of
intra-industry trade on foreign trade and vice versa, it shows that there is a positive
relationship between the two variables.
This obviously allows us to make recommendations along the lines of the development of
intra-industry trade, which will impact positively the development of the Ivorian foreign
trade, which could in turn have beneficial effects on the Ivorian growth. However, the fact
that the main partners flow cross commodity exchanges are the European countries left the
Ivorian economy based on intra-industry trade outgoing or vulnerable. Because prices are
fixed for terms of trade on the international market.
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